Development firm Caruso Affiliated LLC is asking for a 10-year transient-occupancy tax rebate on any new hotel that gets built on the property at 1555 S. Jameson Lane in Montecito.
Caruso’s representative, Rick Lemmo, discussed the proposal Feb. 7 before the Montecito Association Land Use Committee. He said the county would generate $1.7 million a year in property taxes and $1.5 million in sales taxes, so the rebate would effectively save the company about $15 million, according to Montecito Association executive director Victoria Greene. But the county would miss out on 10 years of taxes.
“The county is between a rock and a hard place because the community wants the buildings demolished and wants it built as soon as possible to get rid of the eyesore,” Carbajal said. “We’re trying to get that moving forward sooner than later.”
Caruso representative Matt Middlebrook said it has been difficult to secure funding for the estimated $170 million project, and the rebate would help speed up the process.
“It’s the economy,” he said. “There are no luxury hotels being built from the ground up. Look at the Bacara — people are buying fully built hotels for substantial discounts. That’s there where the money is going rather than ones built from the ground up.”
The 10-year rebate would start after four years, according to Greene. If the hotel is built in five years, it would reduce to nine; if it’s built in six, it would reduce to eight, and so on. But Greene said she isn’t sure the county will approve the rebate.
“It will take the majority of the board,” she said. “Fifteen million dollars is a lot of money, especially in these times.”
The Montecito Association, which is not an official public body but includes hundreds of members, is writing a letter to the county that endorses the Miramar cleanup and a yearlong extension of the Coastal Development Permit. The group doesn’t take a stance on the bed tax rebates, according to Greene.
“The Montecito Association supports the current efforts between Caruso Affiliated and the county to find terms that are fair and equitable to all concerned that will result in the final cleanup of the Miramar site and including extending the Coastal Development Permit by one year,” a draft of the letter reads.
But Caruso is asking for a permanent extension on permit approvals. Although most of the land-use permits are good until 2015, the Coastal Development Permit must be renewed by March 15.
“Is a permanent extension worth giving to get the site cleaned up?” Greene asked. “Because in the end that’s what the deal is.”
Middlebrook said the transient-occupancy tax rebate would manage the risk by providing a cushion for financing.
“It’s a great opportunity to move construction closer, which is a win-win for the county,” he said.
While the county would lose out on 10 years of bed tax, demolishing the deteriorating buildings would serve the community well, according to Carbajal.
“I’m hopeful that with all this work that’s gone into it, that it continues to inch forward and we can reach a win-win and it can be demolished and be a better value to the community,” he said.
Middlebrook said Caruso is looking at about $3 million to demolish the property.
According to county records, Caruso purchased the property for $52,500,000 on Feb. 21, 2007. Local investment experts said many property values have depreciated at least 20 percent since then, and with a projected $170 million development process, it would be difficult for Caruso to get out of the hole.
But Caruso has no plans to sell the property, Middlebrook said.
“We’re not going to sell it,” he said. “We plan on building it and making it a successful property. We remain firmly committed to the project. It’s great for the community and a great opportunity to bring back the Miramar. The TOT rebate is a common one in other jurisdictions and makes sense to get the project off the ground sooner rather than later.”
The Miramar had served as a historic Montecito luxury hotel since 1876, but in 2000 it closed its doors for renovations that never materialized. Caruso is the third owner trying to revive the hotel after hotel magnate Ty Warner became frustrated with the difficulty of developing in Montecito. Prior to Warner, Studio 54 co-founder Ian Schrager gave up his goal to develop the property because of financial difficulties.
“It would be an asset to the neighborhood if it got finished,” said the Rev. Jeff Bullock, rector of All Saints By-the-Sea Episcopal Church next door at 83 Eucalyptus Lane. “It’s just been sitting there as an eyesore.”
Seth Ludwick of Pacific Southwest Realty Service doubts the property will be developed.
“It’s basically undevelopable given the political climate,” he said. “It would be great to see property developed, but it’s expensive and a headache to develop it. I don’t think it will happen.”
“In Rick I found a partner who understands consumers and fully appreciates that the Dodgers are a treasured L.A. institution,” Torre said in a statement. “Since moving to Los Angeles, I have seen firsthand Rick’s dedication to business and people in Los Angeles. I am very excited about this new opportunity.”
The county Board of Supervisors is scheduled to consider the rebate March 6.
“I would like to see what the community wants, that this eyesore is demolished to make the area look reasonably decent in terms of aesthetic value,” Carbajal said. “Two, I want to have that hotel built as soon as possible because it helps the economy.”